Deutsche Bank

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Running Out Of Champagne





The markets, so abundantly juiced by the more than $100 billion pouring in from the Fed every month, are beginning to tire. Like repeated injections of some pain killer; the effects are noticeably starting to wear off. The thrill may not be gone but it is diminishing and one should take note of the condition of the patient. The ten year Treasury; the long bond. Watch them. Whatever your responsibilities; keep your eye on them. They are serving up lunch and are the best indicator of the courses to come. I believe now they are signaling that we have run out of Champagne and that Mad Dog 20/20 will be served with the duck.

 
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Frontrunning: April 5





  • George Soros: 'What Japan is doing is actually quite dangerous because" (BBG)
  • North Korea lacks means for nuclear strike on U.S., experts say (Reuters)
  • Yellen latest to hint about slowing of QE3 (FT)
  • Hollande approval rating hits new low (FT)
  • Hollande Dismisses Reshuffle as Crisis Hits Popularity (BBG)
  • Japan Upper house approves full 5 year term for BOJ gov. Kuroda (BBG)
  • US: Plan to Cap Tax Breaks Is Gaining Steam (WSJ)
  • BOE Says Investors May Be Taking ‘Too Rosy’ a View of Stress (BBG)
  • Kiwis Say ‘Ni Hao’ as China Ties Trump Australia Sales (BBG)
  • Obama Avoids Trading Threats With North Korea’s Kim (BBG)
 
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Deutsche Bank On Central Bank Intervention: "We Are Flying Blind"





Ordinarily in the first post we would recap any of the key overnight events, but in this case there was just one event of note ahead of today's non-farm payroll seasonally adjusted "noise": the halting of the Japanese Government Bond complex due to excessive volatility. Now, this is not some zero-liquidity penny stock or an algo fat binary finger: at last check there is one quadrillion yen in Japanese debt, which makes it the second biggest sovereign bond market in the world. Yet one glimpse at what transpired in overnight trading and one can see just why the Japanese regulators decided it is time to close all bond trading. The reason: the JGB's insane decision to literally reflate or bust, and with it the total loss of all signalling to various asset classes, because while the country is targeting 2% inflation, its bond curve is indicating the most epic deflation in history. The good news: the bond market reopened... eventually; the bad news: who knows if it will, the next time there is a 100% swing from low to high in the 10Y JGB bond yield in the span of hours. Which brings us to the point of this post, summarized best by Deutsche Bank's Jim Reid who overnight said it best: "we are now flying blind"... The central banks are now flying a plane that has lost all hydraulics and their only option is to add ever more power to the engines to pretend they are still in control.

 
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Mapping The Witch-Hunt Of The World's Offshore Bank Account Holders





A cache of 2.5 million files of cash transfers, incorporation dates, and links between companies and individuals has cracked open the secrets of more than 120,000 offshore companies and trusts. The secret records obtained by the International Consortium of Investigative Journalists (ICIJ) lay bare the names behind covert companies used by people from American doctors to Russian executives and international arms dealers in more than 170 countries (as shown in the map below). One wonders how and why this sudden (and timely) leak of documents occurred. If we were a tinfoil-hat-wearing conspiracy theorist we might suspect that this is a staged coup to create a witch-hunt against all offshore capital (legitimate or illegitimate) - and an attempt, as with Cyprus, to push money out of banks and into circulation (pushing the velocity up) as all other monetary policy 'tricks' have failed. While 'offshore' is synonymous with 'tax cheat', there is nothing illegal in moving assets offshore. In fact, as Simon Black notes, given that there is going to come a time, likely soon, that retirement savings will be targeted; diversifying abroad is one of the sanest things you can do to protect yourself against the real criminals.

 
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French Stocks To Drop 33% On Macro Recoupling





The world's macro data is pointing a significant slowdown, and yet - as we noted here - stocks remain sanguine; buoyed by the promises of central planners everywhere that no harm will come to them. Deutsche Bank's Jim Reid, like us, is a little skeptical that this chasm of un-reality can remain for long. His perspective is from the correlation of PMIs and YoY changes in equities (based on data back to the 1990s). The current implied results for the US, UK, and the big 4 in Europe is more than a little worrying - with the French in most trouble.

 
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Frontrunning: April 4





  • Helicopter QE will never be reversed (Evans-Pritchard)
  • Bank of Japan Launches Easing Campaign under new leadership (WSJ)
  • Draghi Considers Plan B as Sentiment Dims After Cyprus Fumble (BBG)
  • Spain threatened by resurgent credit crunch (FT)
  • U.S. Dials Back on Korean Show of Force (WSJ)
  • Gillard Urges Aussie Firms to Emulate German Deutschmark Success (BBG)
  • Bank watchdog warns on retail branches (FT)
  • Xi's Russia visit confirms continuity of ties (China Daily)
  • Portuguese Government Survives No-Confidence Vote (WSJ)
  • Mortgage rates set for fall, Bank of England survey shows (Telegraph)
  • Russia’s bank chief warns on economy (FT)
  • Fed member hints at summer slowing of QE3 (FT)
 
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Bundesbank Probing Deutsche Bank, Or Not Much Ado About TBTF





Back in December we reported that "Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out" in which we wrote "that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time." Our somewhat cynical conclusion at the time was that "since every bank in the world is forced to lie, cheat and mismark its own balance sheets every single day... this may just be completely ignored." Perhaps we were a little bit premature because as the FT reports, "The Bundesbank has launched an investigation into claims that Deutsche Bank hid billions of dollars of losses on credit derivatives during the financial crisis, according to people familiar with the situation." That said, we still stand by our conclusion from four months ago: this, too, theatrical distraction will come and go and nothing at all will change.

 
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Thanks Ben Bernanke: Using A Shotgun As Down Payment For A Car





Thanks to the Fed's ZIRP, the investing world is on a constant reach for yield; and due to the fact that the last bubble of investor largesse (ignoring leverage and reality) was not 'punished' but in fact 'bailed-out', participants in the financial markets learned nothing. Just as the last crisis was formed on the back of an insatiable mortgage-backed security market desperate for new loans (any loans) of increasingly dubious quality to securitize, so this time it is subprime auto loans that have taken over. As a Reuters review of court records shows, subprime auto lenders are showing up in a lot of personal bankruptcy filings. At car dealers across the United States, loans to subprime borrowers are surging - up 18% in 2012 YoY, to 6.6 million borrowers. Subprime auto lending is just one of several mini-bubbles the bond-buying program has created across a range of assets; "it's the same sort of thing we saw in 2007, people get driven to do riskier and riskier things." Of course, with auto production having been the backbone of so many macro data points that are used to 'show' the real economy recovering (despite the channel-stuffing), now that the growth in auto-sales are stalling, it is for the subprime originators "under extreme pressure to hit goals" in their boiler-room-like dealings to extend loans (at ever higher rates) and securitize while the Fed 'music' is still playing. It seems we truly never learn.

 
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Frontrunning: April 2





  • The revolving door continues: Mary Schapiro joins Promontory Financial (WSJ)
  • First Peek at Health-Law Cost (WSJ)
  • Abe warns over Japan inflation target: warns 2% inflation target may not be reached within two years (FT)
  • BoJ's Kuroda tested by divided board (Reuters)
  • Nanjing poultry butcher fourth person infected with H7N9 bird flu (SCMP)
  • What time do top CEOs wake up? (Guardian)
  • Cyprus Seeks More Time to Meet Targets in Talks With Troika (BBG)
  • Investors Ignore Negativity at Their Peril (WSJ)
  • Apple bows to Chinese pressure (FT)
  • One can only laugh: North Korea to restart nuclear reactor in weapons bid (Reuters)
  • Visa Demand Jumps (WSJ)
  • Bloomberg's refutation of Stockman: yes, yes but... look over there, stocks are up! (BBG)
 
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Frontrunning: April 1





  • Goldman's Mario Draghi convinced Italy president Napolitano not to resign (Reuters)
  • David Stockman Warns of Crash Of Fed-Fueled Bubble Economy (BBG)
  • Cyprian archbishop calls on Central Bank's head, Finance Minister to resign (Voice of Russia)
  • Cyprus Parliament President Says Country Should Exit Eurozone (Zero Hedge)
  • Cyprus seeks to find people behind bank crisis (FT)
  • Argentina sticks to its guns over holdout creditor payments (FT)
  • 40% of all trading is now done in dark pools and off exchanges (NYT)
  • Sequester Impact Remains Elusive (WSJ)
  • China’s Home Prices Increase Most in 26 Months, SouFun Says (BBG)
  • Beijing, Shanghai Add to Home Curbs as China Acts to Cool Market (BBG)
  • Two men die in Shanghai in first human cases of bird flu strain (SCMP)
  • Economics will catch up with the euro  (FT)
  • How much gold is there in the world? (BBC)
  • Fannie Mae Regulator Sets No-Doc Modifications for Borrowers (BBG)
 
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Who Said It? "We Must Buy Government Bonds"





No, it wasn't Ben Bernanke or Alan Greenspan, it wasn't Jean-Claude Trichet or his successor Mario Draghi, nor was it Mervyn King, Carney, Shirakawa, or Hildebrand. The answer, as shocking as it may sound, was...

 
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Frontrunning: March 27





  • What bread... What circuses... JPMorgan Chase Faces Full-Court Press of Federal Investigations (NYT)
  • European Regulators to Charge Banks Over Derivatives (WSJ) ... but forgive us if we don't hold our breath
  • Cyprus readies capital controls to avert bank run (Reuters)
  • Damage ripples through Cypriot economy (FT)
  • G4S readies guards as Cypriot banks prepare to open (Reuters)
  • Global pool of triple A status shrinks 60% (FT)
  • Customers Flee Wal-Mart Empty Shelves for Target, Costco (BBG)
  • BOE Says U.K. Banks Have Capital Shortfall of $38 Billion (BBG)
  • U.K. Banks Facing Capital Shortfall (WSJ)
  • Cyprus Details Bank Revamp (WSJ)
  • Kazumasa Iwata Joins Kuroda Naysayers as BOJ to Meet (BBG)
  • BRICS Nations Need More Time for New Bank, Russia Says (BBG)
 
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Here We Go Again: EU Lawmaker To Push For Bail-In Resolution Law For Deposits Over €100K





Here we go again:

EUROPEAN PARLIAMENT TO PUSH FOR DEPOSITORS WITH ABOVE 100,000 EUROS TO FACE BAIL-IN UNDER NEW BANK RESOLUTION LAW - EU LAWMAKER - RTRS

Basically, this is DieselBOOM ver 2.0. How long until someone scrambles to announce that this, too, was taken out of context?

 
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Cyprus - To Template, Or Not To Template: That Is The Wall Street Question





After one of the most fabulous verbal faux pas in recent history was committed yesterday, in which the truth briefly escaped the lips of the new Eurogroup head who still has to learn from his masterful "when it becomes serious you have to lie" predecessor and ever since both he and all of uber-incompetent Europe have been desperate to put the genie back into the bottle to no avail, everyone has been caught in a great debate: to template, or not to template?  Below is a summary of Wall Street's thinking on this key for so many European (and soon global) depositors.

 
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Frontrunning: March 25





  • Cyprus Salvaged After EU Deal Shuts Bank to Get $13B (BBG)
  • Last-minute Cyprus deal to close bank, force losses (Reuters)
  • Anxious, angry Cypriots face uncertain future (Reuters)
  • Spain Brings the Pain to Bank Investors (WSJ)
  • First Switzerland now... U.S. Seeks Answers in Liechtenstein on Tax Cheats (BBG)
  • Rebel Free Syrian Army founder loses leg in Syria blast (Reuters)
  • European Stocks Rise on Cyprus Deal as Italian Bonds, Crude Gain (BBG)
  • Michael Dell Likely to Sweeten Buyout Bid to Save Legacy (BBG)
  • Bankers’ pay premium is narrowing (FT)
  • Surgery Restoring Penis After Prostate Cancer Increasing (BBG)
  • Silent or supportive, conservatives give gay marriage momentum (Reuters)
 
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